Who are our allies?

The large membership of the WEA shows that a lot of heterodox economists want to see substantial change in academic economics. However, I believe this goal will not be achieved by heterodox economists acting on their own. We need more allies outside the heterodox economics community, and the purpose of this article is to start a discussion about where such allies can be found.[1]

Some of our best allies have been students of economics. Their best-known contribution has been to demand that they are taught theories relevant to the financial crash. In the UK, many people in government and business describe students as ‘customers’, and are very critical if a university fails to cater for the wishes of its customers. This is quite a powerful force for change. And it is good to hear about the efforts of the Reteaching Economics group to reciprocate by showing what early career academics can do for these students.[2]

As I see it, many religious leaders share our concern about the state of economics. Pope Francis has been quite outspoken about this, and so also have the present and previous Archbishops of Canterbury. I am less well acquainted with the views of religious leaders from other religions.

And, surprising as it may seem, I think we can also find some allies in mainstream economics. In my experience, some friends from the mainstream have been willing to discuss concerns privately, and have even conceded that heterodox criticism is justified. However, they are usually unwilling to say so in public, and the official mainstream response is either to ignore our criticism, or to give it a hostile reception.

In the past, I thought government economists could be powerful allies, and found many of them were very open to heterodox perspectives, and understood our concerns. But today, it seems that most government economists, in the UK at least, want mainstream thinking, and are wary of the unorthodox. Why the change? It is partly because the new generation reflect their graduate school training, and partly that they see mainstream economics as a palatable and plausible fiction, while heterodox economics is liable to reveal unpalatable and unwelcome truths.

I also believed scientists might help to see sense prevail in mainstream economics. There was some sign of this in the early history of the Santa Fe Institute. The famous dialogue between physicists and economists showed that the physicists were informal with their maths and based everything on evidence, while the economists were formal with maths and based everything on ‘standard’ assumptions (Waldrop, 1994, Chapter 4). To date, however, I have not seen a lot of help coming from that quarter. Even those scientists who are sceptical about mainstream economics do not necessarily want to be seen taking sides with heterodox economists.

What of other social sciences? Certainly, many sociologists and political scientists are uncomfortable with mainstream economics. This does not necessarily translate into support for heterodox economics, because some sociologists can benefit from having a stand-off with economics, and it is useful for them to have ‘straw man’ adversaries with a ‘perverse’ approach to their science. Nevertheless, there are important potential allies here.

It is perhaps less likely that that big business will be an ally. After all, most businesses do not employ economists, and the economists they meet tend to work for regulators or anti-trust authorities. In short, the economist is often seen as a nuisance who gets in the way of business, and from that point of view, indeed, it may be best for business if the economist lives in a fantasy world. Greedy oligopolists need not fear anti-trust economists who believe in Bertrand equilibrium, and insider-traders need not fear economists who believe in efficient markets. But there are important potential allies in small businesses.

Some employers would prefer to see a change in the curriculum – towards ‘real life’ economics and away from an emphasis on economic theory and econometric theory. But while this is true for some, it is not true for all. In the City of London, for example, there is a very strong demand for mathematically competent recruits, while the last thing bankers want is a heterodox economist who knows how much damage a voracious financial services sector can do to the rest of the economy!

And there will be many others that care, as we do, about what is wrong with mainstream economics. The route to finding these people is to ask ourselves this question. Who is being cheated by mainstream economics?

The precise answer to this depends on our particular concerns about mainstream economics. When I ask myself this question, thinking of the errors in mainstream applied economics that concern me most, the answer is simple: ordinary people. By shutting their ears and eyes to heterodox criticism, mainstream economists continue to disseminate a flawed model of economics. While this may serve the needs of government and big business, it can lead to serious errors, and when that happens, it is ordinary people who suffer. To reach the ears of ordinary people we need to work with the media, and that needs careful planning, but in my experience, a really good communications professional can almost always generate a good press story from a powerful academic argument.

These observations are made in the hope of starting a discussion about our potential allies. I would be very interested to hear the views of other WEA members.

Dear Peter
I enjoyed your article and I agree with much of it. In fact, WEA is not the same as the heterodox economist group though there is much overlap and most people in the heterodox association are members of WEA. From the very beginning we, the founding members, have been very keen to launch a pluralist association. Pluralism is indeed one of the aims of the association. There is nothing to prevent mainstream economists joining in; indeed I think that some have. We have also encouraged people from other disciplines interested in economics to join and many have. A couple of years ago I had an interesting exchange with a medical doctor who is interested in – and has made some study of – economics. We have not explicitly encouraged church people but anyone interested in economics and economic problems can join in.
Best wishes
Grazia

Perhaps I should know my place and keep stum as I am not a professional economist. I have always taken the view that the neo-classical approach is technicist and partisan. I did not need WEA to give me that message. I subscribe because there is a well of alternative argument and a basis for policy / programmes that could become within reach of establishment institutions such as governments or university departments. It is not surprising to read this slightly interesting but essentially academic argument of searching for allies. However it did seem core to WEA that the flaw in neo-classical theory is its lack of grounding in real conditions. As such the allies must be the consumers / employees / citizens who are the economic actors. Neo-classical theory is essentially elitist theorising and unless we can connect and thus democratise theoretical creativity we will continue to view economists as a species of being not from the human community.

I fully agree with Peter. I have made similar points in my post on RWER Blog:https://rwer.wordpress.com/2015/04/25/the-message-from-austerity-to-prosperity/
The last paragraph of the post is quoted here:
An important point here is that the real world economists need to take their case to the public, which is victimized by the neoclassical economists. Talking among ourselves is not helpful except in terms of discovering the strongest arguments and best lines of attack. There is absolutely no point in trying to get published in leading journals, or trying to change minds of professional economists – they have the most to lose. Our natural audience are those who have the most to gain by listening to our message. This means that we need to make much greater efforts to convey our message to the general public. This involves participating more on popular forums like conventional blogs, writing book reviews for good books, providing critiques and alternatives for bad ones, writing for newspapers etc. It also involves making the efforts required to translate and present our theories and models in ways attractive and comprehensible to a general audience.

Thank you all for your comments and links which I shall consider and read with interest. Thanks also to those who have emailed me direct. I’m with John Stuart Mill when he said that the only way to understand an issue is to hear and consider what many people – of different backgrounds and opinions – say about it.

Surely the article is missing the point. Economics is fundamentally about prices, how they are determined, the information they convey and the incentives they create. The failure of traditional (and unorthodox) economists to recognize the dual nature of prices has lead many a good economist into blind alleys. Prices convey information on the one hand and by doing so create incentives to change behavior. Societies where economic information is a close approximation to reality do well and those that are distorted by excessive regulation or political manipulation do badly. The Soviet Union collapsed, not as some claim because it was undemocratic or bureaucratic, but because politically determined prices grossly distorted decision making and created massive inefficiencies: petrol driven lorries, TVs that used 3x the electricity of Japanese sets, inefficient cars and aero engines because prices did not reflect the rapid increases in world prices for energy that drove energy efficiency in the West is just one of many examples. China has prospered in recent years as it progressively moved towards market determined prices and away from political price determination.

It has been suggested by some that economics should be regarded as a sub-discipline of cybernetics – the science of information and control. The failure to recognize the role of prices leads too many to underestimate the role of incentives and to construct models that ignore prices and incentives altogether! Another benefit from refocusing the discipline on prices is that it will overcome the problem of analysts downplaying the importance of evidence. Why did very few people anticipate the economic crisis of 2008? Because their analysis was based on models that look to the past rather than on evidence that gives clues to the future.

In his book “On Keynesian Economics and the Economics of Keynes” in the 1960s Axel Leijonhufvud put forward the proposition that Keynes’s “General Theory” was General in the sense that it removed from economic models the assumption of perfect information resulting in a model that oscillates around an equilibrium rather than tending towards it. Which assumption provides a better picture of reality? What a pity that so few people took up the challenge of reshaping economic analysis with prices conveying economic information and constantly, costlessly reshaping incentives.